Financial statement of Delivery Hero GmbH

Transcription

1 Financial statement of Delivery Hero GmbH DECEMBER 31, 2016

2 Content 01. Combined Management Report A. Group Profile Business Model Segments Management System Research and Development 10 B. Report on the Business Situation General Business and Industry Environment Business Performance 13 a) Revenue 13 b) Financing Measures 13 c) Acquisitions 14 d) Discontinued Operations 14 e) Financial and Non-Financial Performance Indicators 14 f) Business Development Employees Business Situation 20 a) Earnings Situation 20 b) Financial Position 22 c) Financial Performance 23 d) Overall Assessment 25 C. Outlook, Opportunities and Risks Outlook 26 a) Future General Business and Industry Situation 26 b) Future Development of the Group 27 c) Overall Assessment from the Management Risk Report Opportunity Report 30

3 D. Use of Financial Instruments Risk Management Liquidity Risk Market Risk 33 E. Supplementary Business Situation Reporting on the Single-Entity Financial Statements of Delivery Hero GmbH Business Model Business Situation 35 a) Earnings Situation 35 b) Financial Position 37 c) Financial Performance 38 d) Overall Assessment 39

4 02. Balance sheet Balance sheet Income statement Income statement Notes to the financial statements for the 2016 financial year 01 General information Accounting policies and presentation methods Explanatory notes on the balance sheet items Explanatory notes on the income statement Other disclosures Subsequent events 56 Appendix I 57 Statement of movements in fixed assets during the 2016 financial year 57 Appendix II 58 List of shareholdings pursuant to Section 313 of the German Commercial Code [HGB] 58

5 01. Combined Management Report

6 A. Group Profile 01 BUSINESS MODEL The Delivery Hero Group (also referred to as Delivery Hero, Group or Company) provides online food ordering services in over 40 countries on six continents. With its services in the online food ordering and online food delivery sectors, it operates in various countries of Europe, Latin and South America, Asia, Africa, North America and Australia. Over the last few years, Delivery Hero has expanded strongly on the basis of external company acquisitions. Thus in the 2015 financial year, the Group acquired the Yemeksepeti Group in Turkey. As a result, Delivery Hero is now represented in the largest food delivery market in MENA. With its acquisition of the Foodpanda Group in December 2016, Delivery Hero expanded its presence on a global basis. In the process, the portfolio was expanded with 8 Eastern European countries, the geographic footprint considerably extended in various young Asian markets, and also widened in Saudi Arabia, the United Arab Emirates and Egypt. The Delivery Hero internet platforms are aligned to the local requirements of their customers who choose from a wide range of delivery services in their region and can look at and order from their menus. Orders can be made by app or via the website and subsequently paid either in cash or on non-cash basis. As an option, Delivery Hero offers the catering businesses a delivery and point of sale system in order to immediately view and accept orders made on the platform. In addition, Delivery Hero offers products and services for catering businesses, such as food packaging, as well as advertising and printing services. In addition to the Online Food Ordering sector, with some of its platforms such as foodora, Foodpanda and additional brands, the Group also offers delivery of the food to customers. The driver fleet is coordinated using proprietary dispatch software. Delivery Hero generates a large portion of its revenue on the basis of orders made. These commissions are based on a contractually specified percentage of the order value. The percentage varies depending on country, type of restaurant and the services provided, as for example the use of a point of sale system, last mile delivery and marketing support. The point of sale system allows catering businesses to immediately view and accept orders made on the platform. In addition to commissions, Delivery Hero generates additional revenue, e.g. with premium placements. Premium placement means that for a fee restaurants are ranked first among all the listed suppliers in their relevant delivery area. Additional revenue is also generated by advertising campaigns. Delivery Hero also generates revenue on the basis of delivery fees by oncharging transaction fees, such as credit card fees or fees from online payment systems when a charge is levied in certain markets. A small share of total commissions relates to standing charges received. The parent company Delivery Hero GmbH (also referred to as DH) was founded with its headquarters in Berlin in 2011 and has since expanded its presence worldwide on local markets with various brands. After various acquisitions between 2014 and 2016, as of the reporting date the global scope of consolidation of the Delivery Hero Group was made up of a total of 136 companies (previous year: 106 companies). For further details, refer to Chapter 2.c) of the Report on the Business Situation. Delivery Hero exercises either direct or indirect control over all subsidiaries

7 The Delivery Hero Group is managed by Delivery Hero GmbH (previously: Delivery Hero Holding GmbH) which is headquartered in Berlin, Germany. Alongside the management of the Group, Delivery Hero GmbH assumes a range of IT, marketing and other services, in particular commercial and technical consultancy services. In addition, as Group holding Delivery Hero GmbH assumes functions such as Group controlling and accounting, public relations, investor relations, risk management and human resources management. The management of the Delivery Hero Group uses data of the regional companies in order to develop global corporate strategy, plan and optimize global marketing, coordinate the network of local brands as well as to identify and implement best practices. Delivery Hero supports the local companies in implementing new processes and products on the respective markets. To a large extent, the subsidiaries are managed by the founders and thus have a comprehensive insight into and knowledge about their markets and their cultures. The subsidiaries implement the global strategy on a local basis and have the primary responsibility for the performance of their own brands. The companies within the Delivery Hero Group use innovative and scalable technologies to create a highly transparent order and delivery process for restaurants, customers and drivers. With financing rounds, Delivery Hero GmbH procures the capital to finance the equity and debt needed to finance the expansion of the operating business. This financing is made either directly in the operating companies or indirectly via an interim holding. Delivery Hero GmbH is headed by a Managing Director with direct reports from further persons as executives for the areas of Strategy, Finance, Marketing, Operations and Information Technology. Furthermore, the management is monitored by an Advisory Board. The reporting of the business situation of the Delivery Hero Group corresponds in principle to that of the reporting for Delivery Hero GmbH. Additional information on the single-entity financial statements is provided in Chapter E Supplementary Business Situation Reporting on the Single-Entity Financial Statements of Delivery Hero GmbH. 02 SEGMENTS The business of Delivery Hero is segmented in four geographical regions. The service range and the individual internet order platforms are aligned to local market circumstances and the competitive situation. The Group distinguishes between four geographically structured segments + + Europe + + MENA (Middle East and North Africa) + + Asia and + + Americas 07 65

8 The MENA segment includes Turkey, the Asia segment includes Australia, while Canada is part of the Americas segment. Delivery Hero is represented with various local brands in over 40 countries. As a result of the Foodpanda acquisition in 2016, 20 geographical markets in Europe, MENA and Asian were added. Europe The Germany, the Group is represented with the brands pizza.de, Lieferheld and foodora. The brands have different target groups. While pizza.de focuses on price-sensitive customer groups such as students, Lieferheld concentrates on customers such as families or young professionals who appreciate a wide range with different options, while foodora operates in the premium segment. In addition to Germany, the Group is represented in Norway, Sweden, Finland, France, the Netherlands, Austria, the Czech Republic, Italy and Greece and on a local basis with various brands such as OnlinePizza, Pizza Online, mjam, DameJidlo, foodarena and foodora. In addition to Germany, Foodora operates in a large number of large European cities, particularly in Austria, Finland, France, Italy, the Netherlands, Norway and Sweden. At the beginning of April 2017, Delivery Hero announced a regional partnership with AmRest Holding SE, the largest publicly traded restaurant operator in Central Europe. The partnership gives Delivery Hero the exclusive opportunity to integrate a large number of AmRest s most popular restaurants and brands throughout Poland into its own food delivery platform. As part of the agreement, AmRest will also place its brands onto the Delivery Hero platforms DameJidlo.cz in the Czech Republic and NetPincér.hu in Hungary. As part of the partnership, Delivery Hero is reducing its stake in its restaurant partner Polska Sp. Z o.o. to 49% (stake as of December 31, 2016: 89.71%). As a result of its acquisition of the Foodpanda Group in December 2016, Delivery Hero extended its portfolio in eight Eastern European countries. Foodpanda is represented in the markets of Bosnia and Herzegovina, Croatia, Bulgaria, Georgia, Hungary, Montenegro, Romania and Serbia with the brands foodpanda, NetPincér, Donesi and Pauza

9 MENA Operating activities in the MENA segment (including the business of the Foodpanda Group) make a significant contribution to the number of orders and the gross merchandise volume (GMV) of the Group. In the MENA segment, Delivery Hero is represented in the markets of Bahrain, Jordan, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates, Turkey and Egypt with brands such as Yemeksepeti, Talabat, Foodonclick, Hungerstation, Hellofood and Otlob. In Turkey, the largest food delivery market in the MENA segment, the Group is represented with the Yemeksepeti brand. Yemeksepeti was founded in 2001 and has been part of the Delivery Hero Group since Yemeksepeti is the market leader in the Online Food Takeaway segment in Turkey, currently listing more than 10,000 restaurants in Turkey on its platform. In addition to Turkey, with the Talabat brand the Group is represented in Bahrain, Jordan, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. In addition, as a result of the Foodpanda acquisition, the Otlob brand, which was started in 1999, belongs to the Delivery Hero Group. Otlob is the market leader in Egypt and one of the oldest e-commerce platforms in the Near East. Foodpanda also operates with the brands foodpanda and 24h in the United Arab Emirates and is the market leader in Saudi Arabia with Hellofood and Hungerstation. Asia The Group has a significant presence in South Korea. In South Korea the Group operates the Yogiyo and Baedaltong brands. While Yogiyo is a classical website for online food ordering, Baedaltong operates in the click-tocall business. This is designed like an industry directory for restaurants. Via a button on the website, it connects customers directly with the restaurant. In the reporting year, business in Australia has been brought together under the foodora brand. The acquisition of Foodpanda significantly expands the geographical footprint of the Delivery Hero Group in Asia, allowing access to the growth potential of various young markets such as Bangladesh, Brunei, Hong Kong, India, Malaysia, Pakistan, the Philippines, Singapore, Taiwan and Thailand. Americas In the Americas segment over 10 geographical markets are part of the Delivery Hero portfolio, including Canada, where the Group is represented with the foodora brand. In Latin America, Delivery Hero operates primarily the brands PedidosYa and Clickdelivery, which have been part of the Group since PedidosYa was founded in 2008 and connects customers and restaurants in Argentina, Brazil, Chile, Panama, Paraguay and Uruguay. Clickdelivery operates in Columbia, Ecuador and Peru. Overall, the Latin American countries have considerable growth potential, something which also includes the online food market

10 03 MANAGEMENT SYSTEM Revenue and adjusted EBITDA are the key financial indicators for corporate management. In addition to the key financial indicators, non-financial indicators are also used to manage the company. These are described in more detail in Chapter B.02.e) Financial and Non-Financial Performance Indicators. 04 RESEARCH AND DEVELOPMENT Most of the employees in IT work not only in ensuring smooth operations, but also in further developing the order platforms deployed within the Delivery Hero Group on the respective sales markets. These platforms are the key resource for generating revenue across the Delivery Hero Group. High priority is also given to the protection of personal data, security of data and ensuring the protection and scalability of the technology and IT infrastructure. Delivery Hero also cooperates with external partners here. In the area of Research and Development, Delivery Hero attaches particular importance in providing the user a comfortable, reliable and secure order platform. Also to be covered is the transformation to the increased use of mobile applications. In addition, the development process aims to further push standardization across business operations combined with the automation of business processes. Furthermore, Delivery Hero intends to advance the innovation process in order to market services via additional sales channels, such as smart TVs. Due to it being difficult to demarcate activities such as maintenance, securing operational availability, ongoing and new development as well as the continuous improvement of the systems, it is not possible to make a quantitative separation of the individual areas. The key structures and the contents of the research and development work in the Delivery Hero Group have not changed in comparison to the previous year. Total expenses across the Group for the IT department were KEUR 31,337 (previous year: KEUR 19,788). This corresponds to 10.6% of revenue in Due to the organization of product, development, maintenance and design work within the IT department, a precise allocation of employee figures is currently not possible. It is thus not possible to break down the total expenditure by research and development activities. Development costs are not capitalized. Due to limited human resources capacity and the large number of new developments, third parties are also mandated in respect to development services

11 B. Report on the Business Situation 01 GENERAL BUSINESS AND INDUSTRY ENVIRONMENT For the past reporting year, the International Monetary Fund forecast 3.1% growth for the global economy, slightly below the expectations for the previous year (3.2%) 01. The generally difficult year for the global economy was marked by a higher level of political uncertainty, stagnating global trade combined with restrained investment expenditure, thus posting a weaker development than had been anticipated. Development of gross domestic product by region in % Region Worldwide Eurozone MENA Turkey Asia Latin America With expected growth of 1.7% in 2016, the Eurozone also generated lower growth than the 2.0% achieved in the previous year 04. This was due to the fact that momentum slowed in respect to domestic consumption and exports 05. In the emerging and developing countries, unchanged growth of 4.1% was forecast. 06 For 2016, there was moderate growth for the most important markets in Europe in which Delivery Hero operated. In Germany, year-on-year price-adjusted gross domestic product growth was 1.8%. Finland at 1.6% and the United Kingdom with 1.8% achieved similar growth rates. Only Sweden at 3.1% is growing considerably more strongly than the Eurozone countries International Monetary Fund 02 World Bank 03 Internationaler Währungsfonds; Asien insgesamt und Lateinamerika insgesamt: Institut für Weltwirtschaft an der Universität 04 International Monetary Fund 05 World Bank 06 International Monetary Fund 07 Kiel Institute for the World Economy 11 65

12 In Asia and Australia growth in comparison to the previous year remained essentially unchanged. Thus gross domestic product growth was 6.8% in the Philippines, 3.2% in Thailand, 4.3% in Malaysia, 2.7% in South Korea and 2.3% in Australia. In the Latin American markets, there was a mixed picture for economic development in While countries such as Peru and Columbia increased strongly at 3.9% and 2.0% respectively, internal political difficulties took a considerable toll in Brazil where gross domestic product declined by 3.6%. 08 In Argentina gross domestic product also moved downwards (by 2.3%). 09 Growth in countries of the Gulf Cooperation Council (GCC), which largely corresponds to the markets in which Delivery Hero operates, was 1.7%, much lower than the figure of the previous year (3.4%), while the MENA region posted growth of 3.2% (previous year: 2.1%). 10 After the strong trend in 2015, growth in Turkey slowed. The country achieved a growth rate of 2.7% (previous year: 4.0%) 11. In the European markets particularly relevant for the Delivery Hero Group, price-adjusted private consumer spending developed in line with economic growth. For example, in Germany it rose by 2.0% compared to the previous year. 12 In the Eurozone, consumer spending of private households rose even more strongly, by 2.6% in comparison to the previous year. 13 In each individual market, there are frequently strong competitors. Key competitors in Europe are the Takeaway Group, Netherlands, with its brand Lieferando.de in Germany, JUST EAT in Great Britain, Belgium, Italy, the Netherlands, Norway or Switzerland and the British Deliveroo Group in European countries such as the Netherlands, France, Germany, Spain and Italy. Deliveroo also operates in Asia in Hong Kong and Singapore, as well as in MENA in the United Arab Emirates. Via its subsidiary UberEATS, the US group Uber also entered the market in various large European and Asian cities. In MENA, in May 2016 the Carriage platform was launched on the market. It is operated by the Kuwait-based Carriage Logistics General Trading Company. A key competitor of Carriage is Talabat. Other important competitors in MENA are Deliveroo and Zomato in the United Arab Emirates. The largest competitors in Asia include Baedal Minjeok in South Korea. On a global basis, the market for online food orders is intensely competitive. The key target group is households with medium and high incomes. In addition, restaurant chains are increasingly offering online order services for their products. However, in many countries Delivery Hero has been able to establish a dominant position, which it further expanded in this financial year. From the Group s perspective, there are three important global trends which impact and accelerate the growth and size of the online food delivery markets. These are the increasing number of people who order prepared food instead of cooking themselves, the sustained trend of having products delivered on-demand to the home or the workplace and a general behavioral change away from offline processes to online among consumers. These three trends influence both the size and the growth of the online food delivery market on a sustained basis. 08 Kiel Institute for the World Economy 09 Kiel Institute for the World Economy 10 International Monetary Fund 11 International Monetary Fund 12 Federal Statistical Office 13 European Central Bank 12 65

13 02 BUSINESS PERFORMANCE a) Revenue In 2016, Delivery Hero continued its strong growth in its core business. Revenue (without discontinued operations) at KEUR 297, (previous year: KEUR 166,157) was 79% up on the previous year. Contributory factors included the 2015 acquisitions of the Yemek and Talabat Groups (which were included on a full-year basis in the consolidated financial statements for the first time) and growth at foodora. Thus the 60% revenue upturn forecast (after adjustment for currency effects) was exceeded. The organic growth was driven primarily by new users and the resulting rise in the number of orders. b) Financing Measures Key financing measures in the 2016 financial year were taking up loans. Thus at the beginning of the financial year, the Group was provided a long-term loan of EUR 120 million. As a result, the Group was able to pay back a loan which had a higher interest rate. Furthermore, Delivery Hero was provided with further loans to finance growth by a partner. These are also long term. 14 Unless otherwise stated, all figures have been rounded to the nearest EUR thousand (KEUR). For computational reasons, there may be rounding differences to the exact mathematical values in tables and references

14 c) Acquisitions In December 2016, Delivery Hero made a full acquisition in Emerging Markets Online Food Delivery Holding S.á.r.l. (also referred to as EMO Food Group or Foodpanda Group) headquartered in Luxembourg and subsidiaries in the context of a non-cash capital increase. The EMO Food Group acquisition results in material changes to the Group s financial performance and financial position. As part of the transaction, cash and cash equivalents of EUR million were acquired. The acquisition of the Foodpanda companies considerably increased user figures as well as the number of restaurants connected across the Group as of the reporting date. As a result of the intangible assets acquired, Group non-current assets surged. In the acquisition the focus was the global strategic positioning. As a result of the acquisition of the Foodpanda Group, companies in an additional 20 countries extend the geographical portfolio at Delivery Hero. d) Discontinued Operations In December 2016, Delivery Hero announced the planned transaction with JUST EAT plc on the disposal of the hungryhouse Group and made a contractual agreement on the matter. As a result, the hungryhouse Group is reported separately under discontinued operations in the consolidated financial statements. The sale of the hungryhouse Group is subject to the necessary anti-trust approval by the United Kingdom s Competition and Markets Authority (CMA). Delivery Hero anticipates that approval will be granted during the course of the 2017 financial year. According to the agreement concluded, the sale price comprises a fixed purchase price component of GBP 200 million payable in cash and a contingent purchase price component of between GBP -30 million up to GBP +40 million payable in cash. The payment of the contingent purchase price component depends on the financial performance of the hungryhouse Group in the period between the conclusion of the purchase agreement and the closing of the transaction. e) Financial and Non-Financial Performance Indicators Revenue is an important financial indicator for Delivery Hero. This reflects the possibility for service sales on the markets and makes it possible to determine the Group s competitive position. Another key financial performance indicator used for management purposes is adjusted EBITDA at the level of the subsidiaries and at Group level. For the definition of adjusted EBITDA, please refer to the comments below and the explanations in Section C.01.b)

15 For the 2016 financial year, the financial performance indicators (revenue and adjusted EBITDA) were as follows: Revenue in KEUR Europe 140,596 91,719 MENA 75,539 30,492 Asia 49,303 32,068 Americas 24,828 11,427 Revenue of reporting segments 290, ,706 Consolidation measures 0-46 Reconciliation effects 6, Group revenue 297, ,157 Adjusted EBITDA in KEUR Europe -47,543-25,662 MENA 21, Asia -25,106-53,226 Americas -19,739-29,408 Adjusted EBITDA of the operating segments -71, ,799 Consolidation measures ,028 Management adjustments -11,211-9,622 Expenses for share-based payment -15,759-31,490 Other reconciliation effects -8,126-3,187 Depreciation -52,935-43,684 Interest and finance income/costs -42,458-47,836 Earnings before income taxes from continuing operations -202, ,

16 Management adjustments relate to costs for services in connection with corporate transactions and financing rounds of KEUR 6,268 (previous year: KEUR 7,388), costs for the achievement of capital market viability of KEUR 2,398 (previous year: KEUR 613), costs for reorganization measures of KEUR 1,765 (previous year: KEUR 1,047) and costs for the implementation of information technologies of KEUR 780 (previous year: KEUR 574). Other reconciliation items include non-operating income and expenses. In 2016, material items in this position included losses from the disposal of subsidiaries of KEUR 1,511 (previous year: KEUR 223), impairment losses on receivables and other assets of KEUR 2,946 (previous year: KEUR 2,523) and expenses for non-income taxes of KEUR 2,591 (previous year: KEUR 578). This was countered by non-operating income in For more detailed information on the reconciliation of segment revenue to Group revenue and the reconciliation of adjusted EBITDA of the reporting segments to earnings before income taxes from continuing operations, refer to the presentation in the notes to the financial statements. In the non-financial area, the number of orders in the financial year and the gross merchandise volume (GMV) are the most important performance indicators. + + Number of orders: This performance indicator records the number of orders made by end customers in the time period described. + + GMV: This performance indicator shows the value of goods (including sales tax) provided to the restaurants and is used as the basis for commissions

17 Non-financial performance indicators developed as follows in the reporting year: Non-financial performance indicators Change No. of orders in thousand Europe 51,647 38,961 12,686 MENA 69,988 31,692 38,296 Asia 29,549 22,809 6,740 Americas 19,563 9,877 9,686 Total 170, ,339 67,408 GMV in KEUR Europe 850, , ,333 MENA 784, , ,890 Asia 457, , ,508 Americas 231, , ,694 Total 2,323,829 1,430, ,425 In the 2016 financial year, the number of orders increased year on year by 65.2%, or almost 68 million orders. Thus the forecast which indicated a growth upturn exceeding 30%, was easily surpassed, due largely to acquisitions

18 f) Business Development Higher revenue is due primarily to the strong rise in the number of orders, both from new and from existing customers. Intensified marketing and sales activities also made a positive contribution to this trend. Alongside classical advertising, such as television spots and online advertising, marketing cooperations were entered into so as to position the respective brands on the local markets in a way to garner publicity. In addition, continuous improvements in products and processes resulted in a better customer experience. This resulted in stable, even increased repeat buying rates, making a material contribution to the growth of the Delivery Hero Group. In the reporting year, it was particularly the Delivery and Sales segments at Delivery Hero which were reinforced. In the wake of the rapid growth at the operating country companies, the IT department was again strengthened to create structures for further growth from operating business. Furthermore, in the country companies, processes were analyzed with the objective of finding optimization potential. In the Customer Services area, ongoing investments in excellent customer support were made globally. In addition, as a result of an improved exchange between the Group holding and the respective country companies, synergies were discovered and leveraged. This will impact positively on the future customer experience. Against the background of the strong organic revenue growth in 2016, it is the management s opinion that business developed favorably. The management feels that the positive operating trend reinforces its view that the services of the Delivery Hero Group represent an attractive product on a global basis for which there remains high demand potential

19 03 EMPLOYEES The average number of employees increased from 2,843 in 2015 to 6,848 in By individual functional area, the situation is as follows: Functional area Change Delivery 3, % Marketing & Sales 1,875 1, % IT % Management % General administration % Total 6,848 2, % This increase which occurred primarily in the Delivery, Sales and General Administration segments was a result of the company acquisitions that were reported on a full-year basis for the first time in the reporting year and the expansion of the Delivery business under the foodora brand in the reporting year. In addition, operating activities were expanded across the Group, something that was continued in As of December 31, 2016, the Group employed 9,209 staff (previous year: 5,170)

20 04 BUSINESS SITUATION a) Earnings Situation The earnings situation of the Group from continued operations is shown below in the condensed statement of comprehensive income: Continuing operations in KEUR Change Revenue 297, , % Cost of sales -84,301-29, % Gross earnings 212, , % Selling expenses -253, , % General administrative expenses -100, ,895-6 % Other operating income 2,156 1, % Other operating expenses -19,920-8, % Interest and finance income / costs -42,458-47,836-11% Earnings before taxes (EBT) -202, , % EBT margin in % % % -54 % In the financial year, revenue of the Delivery Hero Group increased by KEUR 130,869. Growth was driven primarily by organic growth. The reason for this revenue upturn is the significantly increasing number of food orders via the online platforms. The number of orders rose from million in 2015 to million in the reporting year. Key revenue positions were commissions (KEUR 217,265), premium placements (KEUR 29,893) and delivery fees (KEUR 15,934). An analysis of revenue from a geographical perspective shows that a large portion of revenue was generated in Germany (KEUR 72,667), followed by Korea (KEUR 40,830) and Turkey (KEUR 39,757). An assessment at segment level shows higher revenue of KEUR 48,877 in Europe, of KEUR 45,047 in MENA, of KEUR 17,235 in Asia and of KEUR 13,401 in the Americas. The key revenue drivers are the regions Europe at KEUR 140,508 and MENA at KEUR 75,539. Cost of sales rose by KEUR 54,974, more quickly than revenue. The trend resulted chiefly from the rise in delivery costs due to expanding the delivery business by KEUR 40,729. This was due to the strong growth of the foodora Group which was consolidated for a full-year basis for the first time in

21 Of the increase in selling expenses, KEUR 22,050 relates to marketing expenses and KEUR 11,549 to IT expenses. The strongest impact on selling expenses were costs for TV and radio advertising with a share of KEUR 108,255 (previous year: KEUR 119,241) and expenses in relation to acquiring restaurants of KEUR 56,186 (previous year: KEUR 34,281). The IT expenses of KEUR 22,364 (previous year: KEUR 16,753) relate primarily to staff costs generated in connection with the further development of order platforms. Administrative expenses of KEUR 100,898 were largely in line with the previous year (KEUR 107,895). The decline in expenses relating to share-based payment offset the increase in other personnel expenses, in rent and leasing expenses and in expenses for other taxes. While other operating income was at the level of the previous year, other operating expenses increased from KEUR 8,630 in the previous year to KEUR 19,920 in the reporting year. The increase in other operating expenses resulted mainly from the write-down on the goodwill of Delivery Hero Germany GmbH. Depreciation and amortization relate primarily to depreciation on intangible assets such as brands and customer relationships, acquired in the context of company acquisitions over the last few financial years as well as depreciation on property, plant and equipment. The increase in depreciation and amortization results mainly from the full-year recording of depreciation and amortization of intangible assets acquired during the previous year. For the impact of exchange rates, please refer to Chapter I.02.e) of the notes to the financial statements. The negative adjusted EBITDA of the reporting segments improved against the previous year by 34.6% to KEUR -71,202 (previous year: KEUR -108,799). As a result of the ongoing growth strategy, particularly in the area of the foodora Group, in the reporting period negative adjusted EBITDA of the Europe segment increased by 85.3% to KEUR -47,543 (previous year: KEUR -25,662), while adjusted EBITDA in the MENA segment MENA improved by KEUR 21,690 to KEUR 21,186 (previous year: KEUR 504). The positive development in the MENA segment was the result primarily of the platform business of the Yemeksepeti and Talabat brands. In the Asia and Americas segments, negative adjusted EBITDA improved by 47.9% and 41.6% respectively to KEUR -27,952 (previous year: KEUR -53,692) and KEUR -16,893 (previous year: KEUR -28,942). For further information on adjusted EBITDA, please refer to Chapter B.02.e)

22 b) Financial Position The financial position of the Group is shown on the basis of the following condensed statement of cash flows: KEUR Cash and cash equivalents at the beginning of the financial year 160,150 32,829 Cash flow from operating activities -95, ,866 Cash flow from investing activities 111, ,465 Cash flow from financing activities 58, ,306 Effect of exchange rate movements on cash and cash equivalents -3,567-1,654 Net change in cash and cash equivalents 74, ,976 Cash and cash equivalents at the end of the financial year 230, ,151 The negative cash flow from operating activities results primarily in cash flow from operating business as a result of the high marketing investments and higher current assets due to the Group s strong growth. Cash flow from investing activities in 2016 mainly comprises the acquisitions presented in Section D.2 of the notes to the consolidated financial statements and investments in intangible assets (such as software licenses) and property, plant and equipment. Due to the business model, investment activity in property, plant and equipment across the Group is relatively low, as capital is invested primarily in intangible assets. Investments in the context of company acquisitions relate primarily to the cash and cash equivalents acquired (KEUR 132,444) where the non-cash components offset the consideration made. In 2016, cash flow from financing activities reflects primarily payments from borrowings taken up. These measures contributed to securing the financing of operating activities in the Delivery Hero Group. The capital structure of the Group is made up of equity amounting to KEUR 892,208 (previous year: KEUR 765,492), as well as non-current and current liabilities of KEUR 502,690 (previous year: KEUR 443,239) and KEUR 237,252 (previous year: KEUR 180,714). Of the trade payables and other liabilities KEUR 127,792 (previous year: KEUR 111,180) relate to current liabilities and KEUR 264,958 (previous year: KEUR 295,574) to non-current liabilities. To the end of the financial year, there were non-current liabilities to banks of KEUR 116,403 (previous year: KEUR 0), which were taken up to repay a loan which had a higher interest rate. The loan has a variable interest rate and has been extended in euro. For further information on the capital structure, please refer to the comments on the financial performance in Chapter B.04.c.). In 2016, the solvency of the parent company and the subsidiary was ensured at all times, particularly as a result of payments by the partners in the context of loans extended and by taking up a bank loan

23 In 2018, loan liabilities to various lenders totaling KEUR 272,975 are due for payment. Part of the loan repayment is to come from the purchase price payment for the planned disposal of the investment in the hungryhouse Group. This sale is conditional on the approval of the United Kingdom s Competition and Markets Authority (CMA). If the anti-trust authorities do not grant their approval, the management is of the opinion that the partners or further potential investors or other providers of capital will provide the liquid assets required for continuing the parent company, the subsidiaries and thus the Group, especially for the repayment of loans and thus is accounting on a going concern basis. The continuation of the operating activities of the Group and the parent company and subsidiaries on a going concern basis thus depends on implementing further measures to secure capital and equity by the partners, potential investors or other providers of capital. Furthermore, the recoverability of the reported goodwill depends on the occurrence of the underlying assumptions made in respect to revenue and EBITDA growth. As of the reporting date, the cash and cash equivalents reported are not subject to any material restrictions on disposal. Due to local currency controls in Argentina, transferring capital to other countries may be restricted. As of December 31, 2016, there are unutilized credit facilities provided by third parties of KEUR 25,000 (previous year: 0). c) Financial Performance Financial performance is shown on the basis of a condensed statement of financial position: Changes in KEUR Dec. 31, 2016 Share Dec. 31, 2015 Share Change Non-current assets 1,334, % 1,196, % 138,866 Current assets 297, % 193, % 103,839 Total assets 1,632, % 1,389, % 242,705 Liabilities and equity in KEUR Dec. 31, 2016 Share Dec. 31, 2015 Share Change Equity 892, % 765, % 126,715 Non-current liabilities 502, % 443, % 59,451 Current liabilities 237, % 180, % 56,538 Total liabilities and equity 1,632, % 1,389, % 242,

24 Group gross assets increased by 17%, largely due to acquisitions. Financing for the additional assets was provided largely by equity contributed in the wake of the transfer of the Foodpanda Group. The chief element of gross assets remains non-current assets, which in turn are largely intangible assets. As of the reporting date, the key intangible assets related to goodwill at KEUR 702,214 (previous year: KEUR 519,558) to brands at KEUR 437,001 (previous year: KEUR 489,845) and to customer and supplier relationships at KEUR 148,047 (previous year: KEUR 146,140). In 2016, investments in property, plant and equipment amounted to KEUR 9,297 (previous year: KEUR 5,024). In 2016, the considerable increase in current assets of KEUR 138,866 was driven largely by an expansion of operating activities and the resulting rise of current accounts receivable and the inflow of cash and cash equivalents in the wake of the Foodpanda Group acquisition. The increase in cash and cash equivalents by KEUR 70,703 resulted in current assets moving higher. The equity and liabilities side now is made up of equity and primarily of non-current loans. Current liabilities make up only 15% (previous year: 13%) of the consolidated balance sheet total. Primarily as a result of the noncash capital increase as part of the acquisition of the Foodpanda Group, equity increased 2016 by KEUR 378,658. The negative consolidated comprehensive income of KEUR -256,519 (previous year: KEUR -287,168), partially offset this increase. In the reporting year, the equity ratio remained stable at 55%. As of the reporting date, KEUR 9,607 of the equity relates to non-controlling interests. As of the reporting date, non-current liabilities relate primarily to deferred tax liabilities KEUR 108,061 (previous year: KEUR 138,671), which can be largely allocated to the intangible assets acquired in the course of company acquisitions and loans of KEUR 347,162 (previous year: KEUR 266,556), provided in the course of company acquisitions and to finance general business operations. At the beginning of the reporting year, the Delivery Hero Group was provided long-term financing of KEUR 120,000 by a banking consortium which was used to repay existing loans on which higher interest was paid. The increase in current liabilities is due primarily to the higher level of operating activities

25 d) Overall Assessment In summary, the management assesses the financial position, financial performance and earnings situation as positive and in view of the considerable expansion in the reporting year in line with expectations. As a result of the acquisition made in the reporting year, the DH Group considerably improved its financial performance. In addition, on April 1, the Company announced a regional partnership with AmRest Holding SE, the largest publicly traded restaurant operator in Central Europe. This cooperation will allow Delivery Hero to integrate the most popular restaurants and brands of AmRest in Poland and the brands in the Czech Republic and Hungary into its own food delivery platforms. Due to expanding business and fierce competition in many markets, the Group is still generating losses. However, due to the growth strategy this is as indicated in the budget planning. As of the reporting date, the Group had considerable equity and its equity ratio was stable, almost unchanged to the previous year. Revenue increased in the reporting year by 79%, driven primarily by the high number of orders. As a result, despite negative currency effects, the increase was well over the anticipated 60% (after adjustment for currency effects). This also includes the non-organic revenue growth from the company acquisitions made in The Delivery Hero Group also achieved its objective of further improving EBITDA. However, at KEUR -106,914, it was outside the forecast corridor in the reporting year 25 65

26 C. Outlook, Opportunities and Risks 01 OUTLOOK a) Future General Business and Industry Situation For the global economy an increase of gross domestic product of 3.5% is anticipated for 2017 (after 2.9% in 2016). 15 Despite new political uncertainties, a moderate risk in global GDP is expected. In the advanced economies, the economy is gaining momentum. Overall, the expansion contribution of emerging countries is rising, even though structural problems remain. Important risks for the global economy remain an economic slump in the Chinese economy and the massive monetary expansion policies of various central banks. 16 For Germany, the German Institute for Economic Research has increased its forecast for 2017 to 1.4%, basing this on the ongoing upturn in employment. On the other hand, higher inflation impacts private consumption negatively. For the European Union, moderate expansion of 1.9% is forecast for After the decision to exit the EU, the economy in the United Kingdom has not slowed as had been expected. In the other countries of the EU, a strong economic development overall is anticipated. 17 In the South-East Asian emerging countries, expansion is stable overall. For this reason, a strong growth level of 6.2% is expected, as was the case in the previous year. After two years of recession, the economy in Latin America is recovering only slowly. For 2017, growth of 0.7% is forecast. Within this group, growth of 2.5%, 2.2% and 3.8% is expected for Argentina, Columbia and Peru respectively, while in Brazil gross domestic product is slated to contract by 0.7%. 18 For the countries of the Gulf Cooperation Council (GCC), growth of 2.3% is anticipated for 2017, while for MENA growth of 3.2% is being forecast. 19 For Turkey in 2017, the anticipation remains of moderate growth amounting to 2.9%. 20 Over the course of the next few years, it is anticipated that the global market for food delivery services will continue to achieve average annual growth of 3.6%. 21 The key drivers of this trend are increasing urbanization, a further increase in the number of households with medium income levels and rising consumer spending. What is more, the ongoing increase of internet penetration is a factor driving further growth for the market of online delivery service relevant for Delivery Hero. Currently the global market for food delivery services breaks down across the regions of Asia and the Middle East at approximately 37%, Europe at roughly 32%, North America at 23% and Latin America with some 7%, but with expected market growth of 4.2% has the highest growth rates. 22 A sub-area of the market for food delivery services is the market for internet food delivery services. 15 Kiel Institute for the World Economy 16 Kiel Institute for the World Economy 17 Kiel Institute for the World Economy 18 Kiel Institute for the World Economy 19 International Monetary Fund 20 International Monetary Fund 21 McKinsey & Company 22 McKinsey & Company 26 65

27 Here orders are made online using specially established order platforms. For this comparably young market segment, the Group expects higher growth rates than for the classical delivery market of telephone orders. b) Future Development of the Group For the 2017 financial year, the management of the Delivery Hero Group anticipates that both the number of orders and the number of connected restaurants will increase further. In 2017, these increases will be underpinned by ongoing promotion with concentrated marketing measures, targeting not only continuous use of the order platform by existing customers but also generating new customers. Thus the objective for 2017 is to increase the number of orders by more than 30% in comparison to the previous year. The number of restaurants connected on the platforms (restaurants online) is set to be increased slightly in 2017, thus supporting the number of orders and thus revenue growth. In the wake of these measures, for the 2017 financial year the management anticipates a considerable revenue upturn (adjusted for reporting the hungryhouse Group as discontinued operations). Alongside organic growth within the Group, this increase should also be fueled by the acquisition of the Foodpanda Group which took place at the end of For the 2017 financial year, the management anticipates that a considerable decline of the negative adjusted EBITDA will be achieved. Adjusted EBITDA the earnings from continuing operations before income taxes, finance income/costs, depreciation and amortization and non-operating earnings effects. Non-operating earnings effects comprise particularly (i) expenses for share-based payment, (ii) expenses for services in connection with corporate transactions and financing rounds, reorganization measures, the implementation of information technology and the achievement of capital market viability and (iii) other non-operating expenses and income, especially the net result from the disposal of fixed assets, the net result from the sale and discontinuation of subsidiaries, impairment on other receivables and non-income taxes. As the corresponding adjustment effects are not subject to planning, the (non-adjusted) EBITDA and thus profits (determined in line with the Accounting Guidelines of the company) cannot be calculated. In addition, the anticipated adjusted EBITDA is to be adjusted for the effects of the discontinued operations of the hungryhouse Group. To the end of the 2016 financial year, the scope of consolidation changed considerably in comparison to the previous year as a result of the acquisition of the Foodpanda Group and will also change in 2017 on the basis of the planned disposal of the hungryhouse Group which is currently subject to the decision from the CMA. At this moment in time, it cannot be assessed how the integration of the Foodpanda Group will impact the earnings trend in the Group. Over the next few years, the companies of the Foodpanda Group will make a material contribution to revenue across the Delivery Hero Group. Due to ongoing investments on the part of the subsidiaries, a negative contribution to the Group s earnings position is expected for the next financial year. Both the acquisition of the Foodpanda Group and the planned disposal of the hungryhouse Group can impact adjusted EBITDA - in a positive and a negative fashion

28 Due to the comparatively short company history of the Group and the fact that Delivery Hero is operating in a relatively new market, any forecast on the earnings trend is subject to considerable uncertainty. Adjusted EBIT- DA is dependent not only on factors that can be impacted by Delivery Hero, but also by those over which it has no influence. For example, if the Group were forced to defend its position against new competitors in specific markets or to react to revenue downturns, then measures which may not have been scheduled previously may have to be implemented (e.g. increasing marketing expenditure) which can result in a negative development of adjusted EBITDA which deviates considerably from the previous estimate. c) Overall Assessment from the Management Overall, the development of business for the 2016 financial year and the general situation are regarded as positive. The Delivery Hero Group achieved its growth targets and considerably strengthened its capital basis, meaning that the Group is also in a position to finance future growth. The assumptions on the economic development of the market and the industry are based on assessments which the management of the Delivery Hero Group considers realistic in line with currently available information. However, these estimates are subject to uncertainly and bring with them the unavoidable risk that the forecasts do not occur, either in terms of direction or in relation to extent. The forecast for the forecast period is based on the composition of the Group at the time the financial statements were prepared. The activities of Delivery Hero are subject to various risks which are described in the Risk Report. As far as possible, measures are taken to provide protection against current and potential risks. In the medium term, it is expected that the market position of Delivery Hero will be further strengthened. 02 RISK REPORT The Risk Report deals with the business risks which the Delivery Hero Group considered itself exposed to in the 2016 financial year and at the reporting date and covers a period of at least one year. The risks in the following report are shown in the order of their impact on the Group (gross impact). Despite its strong growth, the Delivery Hero Group still depends on external funding. For this reason, turbulence on financial markets could impact negatively on the financial possibilities of Delivery Hero GmbH in respect to its operating activities. Open questions on the economic and institutional stabilization of the Eurozone, the expansive monetary policy of large central banks worldwide and the unresolved debt problems in numerous industrial and developing countries result in considerable risks. What is more, business operations in Argentina represent a not inconsiderable risk in respect to potential hyperinflation. However, the management assesses the risks to the business of the company from the current political situation in Turkey as low. In 2016, Delivery Hero GmbH secured funding in the context of capital increases, thus making it possible to finance the operating activities of the operating subsidiaries in In addition, a long-term financing agreement was concluded with an international banking consortium making it possible to repay higher interest liabilities. Furthermore, there are unutilized credit facilities at the level of Delivery Hero GmbH